The rise and rise of the renter-investor

This past month has seen some media around a growing segment of the property buyer market...the "renter-investor" segment.

These reports caught my interest because I'm a renter-investor, and for a long time I've thought that renting and investing is the most economically sustainable way to buy property.

As this recent article in Property Observer noted "renter-investors refers to generally young buyers who choose to purchase an investment property instead of their first home. Typically because they can’t afford to buy in lifestyle areas but want to live close to their workplace and don’t want to live further out from the city where properties tend to be cheaper."

The article goes on to point out that "these buyers are faced with opting out of property ownership and renting for the foreseeable future, or buying as an investor. This shift in borrowers’ thinking is particularly strong in first home buyers, who are thinking outside of the square and, in some cases, foregoing the first home owner grant in order to get into the property market...with the cost of properties in these ‘lifestyle areas’ out of reach for many first homebuyers, it’s not surprising to see they’re taking a more creative approach."

Interestingly two more stories in Property Observers this month carried some data on the potential number of people who are already or are intending to follow this property strategy in the future.

The first story estimated that "one in ten buyers are choosing to "rent to invest". It cited the following figures:

  • an early 2011 study from Terry Burke, professor of housing studies at Swinburne University that estimated 11% of all residential properties are purchased by people who rent their own homes.
  • a June 2011 report compiled by AFG which indicated that property investors accounted for more than a third of investment loans (36.2%) recommended by its mortgage brokers.
  • a February 2011 Mortgage Choice survey of 1,000 first home buyers which found that 14.2% of first home buyers who will purchase a home in the next two years intend to rent out one or more of the rooms, compared with 7.8% of recent first home buyers who already rent out a room in their homes.

Their second story, a week later, cited a 1,060 respondent Mortgage Choice survey of first-time investors who plan to buy their first investment property over the next two years, found that 19% will be making their first home purchase. So 19% of first home buyers in the next two years are planning to buy an investment property.

Personally it doesn't surprise me that its starting to dawn on more people that renting and investing is a really efficient use of their limited resources.

While none of this market research is definitive or exhaustive in terms of properly quantifying just how many people are starting to consider this property strategy, what it says to me is that what has most likely been a relatively small niche segment of the market is starting to grow.

What is that saying? Necessity is the mother of invention...?

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